Why Primark’s Lack Of E-Commerce Hurts

People pass a closed Primark Store in Leicester during England’s third national lockdown to curb the … [+] spread of coronavirus. (Photo by Mike Egerton/PA Images via Getty Images)

Primark’s parent company, Associated British Foods (ABF), reported that for the 16 weeks that included last November and December Primark had a revenue decline of 30% because of its closed stores and the lack of e-commerce. And now, more stores have had to be closed in the U.K. because of a new, more contagious strain of the coronavirus, forcing the British government to force lockdowns and enforce Tier 4 restrictions.

That lack of e-commerce is a shocking admission after 10 months of the pandemic, a time when many companies achieved satisfactory revenues through digital commerce. Target

TGT
stores reported digital sales increased +193% during the Christmas selling season and noted that 95% of the orders were fulfilled by stores. I cite this as an example of how an aggressive retailer solved its problem of store closings.

In the annual report for the year ended September 12, 2020, there were 384 Primark stores operating world-wide in 13 countries. To date, only 12 stores are in the United States (and that is after 3 were added in the past year). They are located in seven states: Massachusetts (Boston, Braintree, and Burlington); New York (Brooklyn and Staten Island); Connecticut (Danbury); New Jersey (East Rutherford and Freehold), Pennsylvania (King of Prussia and Willow Grove); Florida (Sunrise), and Illinois (Chicago). In contrast, there are more than 190 stores in the United Kingdom, 48 in Germany, and 32 in the Republic of Ireland. Surprisingly, none are in Canada

I have seen a number of Primark stores, all chock-full of inexpensive fashion merchandise as well as shoes and accessories for the whole family. Apparently, management concluded demand for these products was down and chose not to sell their wares on the internet. That’s proving to be an error in judgement. As illustrated above, Target carries a similar assortment in a much larger selling space and found it profitable to sell fashion, accessories, and shoes on the internet during the current pandemic period. Primark CEO George Weston, however, wanted customers to come to his stores despite the threat of the virus. Even now, it is not too late; I would build up an e-commerce organization since people (especially young people) will find the time, at odd hours, to shop for themselves and their off-spring during these stressful times.

The annual report for the year that ended in September 2020 noted that sales in the United States were 10% lower on a comparable basis. The company further states that, excluding the large destination city center store in Boston, sales were even with last year. However, that was last fiscal year, and the report did not include the sales during the holiday season. That is where Primark lost momentum and customer recognition.

305 of Primark stores are closed at this time, mostly due to the pandemic raging in and around the UK. That means only about 28% of the stores are open. Management indicated that performance by store has varied since customers work more at home and there is less tourism as well. While some stores have been able to operate with extended hours, others have felt the loss of foot traffic in their area.

The company did say that if the entire Primark operation were to close down because of lockdown measures until the end of March, the company would lose about 800 Million pounds ($1.09 Billion). That would reduce profits by an estimated 300 Million pounds ($409 Million). Despite the concern about the pandemic, Primark opened five new stores during the recent 16-week period including one in New Jersey’s American Dream shopping mall. It received a very positive reaction according to Retail Dive. While the pandemic has delayed some store openings, the company expects to open 15 new stores across Europe and the United States in the current fiscal year. Based on the successful resizing of several U.S. stores, ABF said it will also downsize its Boston Downtown Crossing store to improve profitability and customer experience.